On February 9th, the SEC announced that it is proposing new rules and amendments intended to protect investors by reducing risks in the clearance and settlement of securities. The revisions would increase operational efficacy by shortening time between the execution of securities transaction and its settlement. The proposed rule would decrease the standard settlement cycle for the majority of broker-dealer transactions from two business days after the trade date (“T+2”) to one business day after the trade date (“T+1”).
In 1993, the standard settlement cycle for securities transactions was shortened from T+5 to T+3. Then, in 2017, the standard settlement cycle was further shortened from T+3 to T+2.
If approved, the proposed rules would also:
- require compliance with a T+1 standard settlement cycle, if adopted, by March 31, 2024;
- introduce new requirements for the processing of institutional trades by broker-dealers, investment advisers, and certain clearing agencies to facilitate a T+1 standard settlement cycle;
- eliminate the separate T+4 settlement cycle for firm commitment offerings priced after 4:30 p.m; and
- facilitate straight-through processing by proposing new requirements applicable to clearing agencies that are central matching service providers (CMSPs).
Further details on the proposed rules and amendments is available on the SEC’s Reducing Risk in Clearance and Settlement fact sheet on sec.gov. For more information, contact Matthew Lee, Assistant Director, Office of Clearance and Settlement at (202) 551-5710.
The public may submit feedback on matters related to the proposal, including how best to further advance beyond T+1. The comment period will remain open for 30 days after publication in the Federal Register. For instructions on how to respond, see the Proposed Rule on the SEC’s website. The proposal will be published on the SEC’s website and in the Federal Register.
Sources:
SEC Issues Proposal to Reduce Risks in Clearance and Settlement (sec.gov)
